NGC In THe Gold Reporthttps://www.theaureport.com/pub/co/3680
TER: On to graphite.
CB: The share prices of almost all of these graphite juniors in the last couple of months have gone parabolic. Graphite is likely to be the story of 2012 and we're fielding a lot of questions from our subscribers on how to interpret this space and how to invest accordingly. It is exciting, and there's a lot to learn about it and a lot of potential for growth, but there also is apparent excess capacity in China, which we think argues for extreme prudence when choosing where to invest. That's one caveat that I would offer in terms of thinking about investing in this space: the potential that China could ramp up production, including high-purity, large-flake graphite production.
TER: We're also starting to hear about spherical graphite. Does this form have any advantages, for example, through use in specific applications?
CB: The key to manufacturing an efficient lithium-ion battery is to try and achieve the highest energy density for a given surface area. Producers essentially shape flake graphite into a sphere to realize the maximum energy density for the battery in the annode. As this is a highly specialized product, it commands a higher price on world markets. Access to spherical graphite isn't the most important issue. More important is the ability to access the large-flake, high-purity graphite in a stable geopolitical jurisdiction at the lowest cost. Large-flake natural graphite is currently one-third the price of synthetic graphite, which is predominantly what's used in batteries. A real challenge to vehicle electrification is the cost of the car and the bulk of this cost is associated with the battery. If you can lower the cost of the battery either through breakthroughs in electro-chemistry or by using lower-cost raw materials, mass adoption of electric vehicles may be here sooner than we think.
TER: What are some plays that you're following?
CB:Northern Graphite Corporation (NGC:TSX; NGPHF:OTCQX) is a company that we've followed from before its initial public offering and still really like. It has extremely strong management that has experience in graphite mining. The metallurgy of its Bissett Creek property right off of the Trans-Canada Highway is very well understood, thanks to recent findings by the company as well as a great deal of historical work. Northern Graphite is well on its way to producing a bankable feasibility study in Q112 or Q212. It's a highly scalable resource that appears open in multiple directions and is likely to grow the overall tonnage. Bisset Creek demonstrates a low capital expenditure of CAD$70-80M and competitive cash costs of $1,000/t. Finally, Northern Graphite released successful pilot plant test results earlier this year, where results showed that more than 50% of the concentrate produced will be jumbo-size +48 mesh flake, averaging 97.7% graphitic carbon. All of this adds up to what I think will be a very high-margin business.